Trustees seeking ethical investing and diverse income with ETFs
EXCLUSIVE: Values-based investing as well as a move towards diversification of income sources are some of the major trends with exchange-traded funds through SMSFs, says investment manager VanEck.
Speaking exclusively to SMSF Adviser, VanEck managing director and head of Asia Pacific Arian Neiron noted that ESG and values-based green investing is something he has noticed in the ETF sector in relation to SMSFs, particularly those that are in the wealth accumulation phase.
“I think the bushfires in Australia have been a big catalyst for that. That’s obviously been a more local phenomenon,” he said.
As for SMSFs in the drawdown phase, Mr Neiron said trustees are looking towards diversifying their incomes and are looking towards buying the likes of high-yield ETFs including emerging market bonds, floating rate credit such as Tier 2 subordinated debt and listed hybrid active ETFs.
He said this is mainly because the yields are coming off traditional sources of income, which normally include term deposits or blue-chip equities.
“They’re pursuing yield that’s at a premium because they have to go up the risk curve and uncorrelated to traditional asset classes. That’s what we’re really seeing as the two key themes,” Mr Neiron said.
“I think universally around SMSFs, they’re deploying their capital offshore, if it’s China A-shares, if it’s emerging markets on a broad spectrum, if it’s a developed markets and quality companies, which are seeing more and more diversifying away from Australia and the Australian economic cycle. They’re doing that through ETFs.”
Despite cost pressures slowing down the rate of new establishment of SMSFs as well as declining cash rates, Mr Neiron said he’s noticed SMSF trustees looking towards ETFs to cash equities or instantly diversify their portfolio.
“So where they’ll have an incumbent blue-chip Australian equity portfolio, they’re deploying that spare capacity in their portfolio more and more,” Mr Neiron said.
“We’re seeing that a lot of accountants and financial advisers are advising clients who are trustees of self-managed superannuation funds in the retiree-type segment.
“When we go to various individual investor conferences, most of the individual investors are SMSF trustees, and they’re the ones more curious about ETFs, about the opportunities that they offer, particularly overseas.”
Adrian Flores is the deputy editor of SMSF Adviser. Before that, he was the features editor for ifa (Independent Financial Adviser), InvestorDaily, Risk Adviser, Fintech Business and Adviser Innovation.